Market confidence in Ireland 'fragile'
Recent financing measures have added to Ireland’s positive credit momentum, increasing the chances of a full return to bond markets later this year, ratings agency Fitch has said.
However, the agency warned that market confidence still remains extremely fragile, and a further escalation of the eurozone crisis could thwart Ireland's return to the capital markets.
Fitch said Ireland's investment-grade BBB+ rating remains on negative outlook because of risks to growth and fiscal consolidation.
The recent sale of five- and eight-year bonds and the proposed sovereign annuity bonds underline the Government’s “improving financial flexibility”, the agency said, although it is “still uncertain” what degree of market access can be maintained after the EU-IMF bailout programme expires.
Although Ireland has largely regained external competitiveness, “it remains at risk from a further intensification of the euro zone crisis”, Fitch said.
Fitch said it was yet to be seen if banks will vote against arrangements “that are clearly not needed” and that it is uncertain who will act as personal insolvency practitioners, how they will be paid, whether their pay will include incentives, and how any malpractice will be managed.
Fitch doesn’t expect the new legislation to have an immediate effect on the ratings of Irish residential mortgage-backed securities sold by banks to raise funding, as it already expects 20 per cent of mortgages to default.
The agency said it expected the arrangements to be implemented towards the end of this year.